SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
Commission File # 1-3185
UNITED MERCHANTS AND MANUFACTURERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-1426280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1650 Palisade Avenue, Teaneck, N.J. 07666
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 837-1700
Indicate by check mark whether the registrant (1) has filed all documents
and reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether registrant has filed all documents and
reports required to be filed by Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes [X] No [ ]
As of February 19, 1996, there were 17,845,000 shares of Common Stock, Par
Value $1 per share, outstanding.
1
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UNITED MERCHANTS AND MANUFACTURERS, INC.
AND SUBSIDIARIES
FORM 10-Q
- I N D E X -
Page
Number
Part I Financial Information
Consolidated Statement of Operations.............................. 3
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 4
Consolidated Balance Sheet........................................ 7
Consolidated Statement of Cash Flows.............................. 8
Notes to Consolidated Financial Statements........................ 9
Part II Other Information
Items............................................................. 15
Signatures........................................................ 15
2
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PART I - FINANCIAL INFORMATION
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(000 omitted)
-----------------------------------------
Three Months Ended Six Months Ended
December 31 December 31
------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Net sales........................ $13,417 $16,975 $25,327 $37,094
Cost of sales.................... (7,123) (10,606) (13,154) (21,718)
Selling, general and
administrative expenses......... (6,221) (8,701) (11,928) (18,116)
Amortization of goodwill......... (180) (180) (360) (360)
Loss on termination of certain
operation (Note B).............. (500) (500)
--------- --------- --------- ---------
Operating Loss ($107) ($3,012) ($115) ($3,600)
Interest expense................. (1,786) (2,933) (3,510) (5,689)
Gain from reduction of liability
for postretirement benefits other
than pensions (Note C).......... 10,731
Gain from sale of assets not
used in operations.............. 5,421 5,421
Loss on sale of operation -
(Note B)........................ (835) (835)
Other income .................... 118 129 132 210
Minority interest in net
(earnings) losses of subsidiary. (85) 223 (247) (3)
Provision for income taxes....... (25) (25) (50) (50)
--------- --------- --------- ---------
Income (Loss) from
Continuing Operations $3,536 ($6,453) $12,362 ($9,967)
Discontinued operations (Notes A and B):
Net earnings (loss) prior to sale
or closing..................... 43 (532)
Loss on closing................. (7,900) (7,900)
--------- --------- --------- ---------
Net Earnings (Loss) $3,536 ($14,310) $12,362 ($18,399)
Dividends applicable to preferred
stock (Note E).................. 1,125 1,125 2,250 2,250
--------- --------- --------- ---------
Net Earnings (Loss)
Applicable to Common Shares $2,411 ($15,435) $10,112 ($20,649)
========= ========= ========= =========
Average common shares outstanding 17,845 17,845 17,845 17,845
Earnings (Loss) per common share:
Continuing operations........... $0.14 ($0.42) $0.57 ($0.68)
Discontinued operations......... 0.00 (0.44) 0.00 (0.47)
--------- --------- --------- ---------
Net Earnings (Loss)
per Common Share $0.14 ($0.86) $0.57 ($1.15)
========= ========= ========= =========
See Notes to Consolidated Financial Statements.
3
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales of United Merchants and Manufacturers, Inc. ("UM&M" or
the "Company") decreased by 21% during the second quarter of fiscal 1996 which
ended December 31, 1995, to $13.4 million from $17.0 million during last
year's same quarter. This decrease is the result of the sale of the Company's
retail outlet store operation effective December 31, 1994, which had
contributed approximately $4.3 million to net sales in last year's quarter.
During the quarter ended December 31, 1995, the Company's remaining operation,
its 79%-owned costume-jewelry subsidiary, Victoria Creations, Inc.
("Victoria") , reported a 4% increase in net sales as compared to the same
period last year. Victoria's branded label merchandise, Givenchy, Richelieu
and Lagerfeld, were at sales levels below those of the prior year for the
current fiscal year's quarter as retail sales continued to underperform
expectations and prior year's comparable period sales volume. Sales of
Victoria's private label lines increased during the three months ended
December 31, 1995 over such sales for the equivalent period last fiscal year
as new private label market channels received initial shipments of
merchandise. Sales of out-of-season merchandise (which is sold at lower than
Victoria's normal margin) declined from those of the prior year's comparable
period as less inventory was available for such sales.
For the quarter ended December 31, 1995, the Company reported a consolidated
operating loss of $107,000 versus an operating loss of $3.0 million in last
year's quarter. This improvement was the result of reduced corporate overhead
expenses and the sale of the retail outlet store operation, which reported an
operating loss of $855,000 during last year's quarter, together with increased
operating income of Victoria. Victoria reported operating income of $1.1
million during this year's quarter as compared to an operating loss of $80,000
for the same period last year. Victoria's increased operating results were
primarily the result of the increased sales referred to above and increased
gross margin. Victoria's gross profit, as a percentage of net sales, for the
current quarter increased 6% percentage points from that of the three months
ended December 31, 1994. The operation's selling, general and administrative
expenses decreased 2% in the current year's quarter from those of last year's
quarter primarily as the result of reductions of sales volume related expenses
and the operation's continued emphasis on expense control.
Consolidated interest expense decreased 39% for the three months ended
December 31, 1995 compared to such expense in the second quarter of last
fiscal year due primarily to the reduced interest rate resulting from the
renegotiation of borrowing arrangements in July 1995 and to lower average
borrowings. See Note F of Notes to Consolidated Financial Statements.
Consolidated earnings from continuing operations of the Company were $3.5
million for the three months ended December 31, 1995 compared with a loss of
$6.5 million for the same quarter last fiscal year. Excluding the operating
loss of the retail store outlet operations from the fiscal 1994 quarter
results, the loss would be $5.6 million for that quarter. The earnings from
continuing operations for the current quarter include gains from sale of
assets not used in the operations of $5.4 million and reflects the reduced
interest expense mentioned above. The loss from continuing operations of the
prior year's quarter includes a loss of $835,000 on sale of the retail store
outlet operation.
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Consolidated net sales of the Company for the six months ended December 31,
1995 decreased 32% from the net sales of $37.1 million reported for the prior
year's first half. The decrease is primarily the result of the sale by the
Company of its retail store outlet operations effective December 31, 1994 as
mentioned above. Excluding the sales of this operation from the fiscal 1994
first half, net sales would show a decrease of 8%. For the six months ended
December 31, 1995, Victoria's net sales decreased 8% from the net sales of
$27.5 million reported in the prior year's first half. The decrease in
Victoria's net sales for the six months ended December 31, 1995 is attributed
to limitations on borrowings of cash from Victoria's senior secured lender
during the five-to six-month period prior to August 1995. The limitations on
borrowing constrained Victoria's ability to purchase raw materials needed to
accept orders for finished goods for shipment during the first fiscal quarter
of the current year. The limitations were lessened at the end of July 1995
when both the Company and Victoria each renegotiated its long-term debt with
its lender (see Note F of Notes to Financial Statements).
For the six months ended December 31, 1995, the Company reported a
consolidated operating loss of $115,000 versus an operating loss of $3.6
million in last year's first half. As with the second quarter discussed
above, the improvement was the result of reduced corporate overhead expenses
and the sale of the retail outlet store operation, which reported an operating
loss of $1.2 million during last year's half, together with increased
operating income of Victoria. Victoria reported operating income of $2.3
million during this year's six months as compared to operating income of $1.9
million during the same period last year. Victoria's increased operating
results were primarily the result of the increased gross margin and reduced
selling, general and administrative expenses. Victoria's gross profit, as a
percentage of net sales, for the current half year increased 2% percentage
points from that of the six months ended December 31, 1994. The operation's
selling, general and administrative expenses decreased 9% in the current
year's six months from those of last year's first half primarily as the result
of reductions of sales volume related expenses and the operation's continued
emphasis on expense control.
Consolidated interest expense decreased 38% for the six months ended December
31, 1995 compared to such expense in the first half of last fiscal year due
primarily to the reduced interest rate resulting from the renegotiation of
borrowing arrangements in July 1995 and to lower average borrowings. See Note
F of Notes to Consolidated Financial Statements.
Consolidated earnings from continuing operations of the Company were
approximately $12.4 million for the six months ended December 31, 1995
compared with a loss of $10.0 million for the same period last fiscal year.
Excluding the operating loss of the retail store outlet operations from the
fiscal 1994 six months results, the loss would be $8.8 million for that
period. The earnings from continuing operations for the current six months
include gains from sale of assets not used in the operations of $5.4 million
and reflects the reduced interest expense mentioned above. In addition, these
earnings include a gain of $10.7 million from reduction of liability for
postretirement benefits other than pension reported in the quarter ended
September 30, 1995 (see Note C of Notes to Consolidated Financial
Statements). The loss from continuing operations of the prior year's six
months includes the loss of $835,000 on sale of the retail store outlet
operation mentioned above.
5
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See Note B of Notes to Consolidated Financial Statements regarding the
Company's discontinuance of its Buffalo Mill Operations.
LIQUIDITY AND CAPITAL RESOURCE
During the six months ended December 31, 1995, the Company sold certain
assets, primarily land and buildings, that were not being used in its ongoing
operations (see Statements of Operations and Cash Flows). The cash received
was used in its operations and to reduce its long-term debt. As a result of
the sales, the Company depended to a lesser extent on borrowings to finance
its operations. The amounts which the Company borrows under its revolving
loan agreements fluctuate based on the Company's cash availability and
requirements. Working capital increased to $11.2 million at December 31, 1995
from $7.7 million at June 30, 1995. The Company's current ratio increased to
1.68 to 1.0 at December 31, 1995 as compared to 1.41 to 1.0 at June 30, 1995.
As discussed in Note F of Notes to Consolidated Financial Statements,
effective July 31, 1995, the Company and Victoria, each renegotiated its
borrowing arrangements with that its senior secured lender. Currently,
short-term needs for working capital are obtained from borrowings under the
renegotiated revolving loan facility or from the proceeds from the sale of
assets. The Company does not anticipate substantial increased needs for
long-term borrowings.
During recent years, the Company has incurred significant losses from
operations and as of December 31, 1995 has a stockholders' equity deficit. As
discussed in the Company's 1995 Annual Report on Form 10-K, in June 1994, the
Company reduced its senior secured indebtedness by approximately $63,400,000.
While that was a substantial, positive development for the Company, as of June
30, 1995, the Company's independent auditors' report stated that the recurring
losses from operations, net deficiency in stockholders' equity and
significant debt owed by the Company raise substantial doubt as to the
Company's ability to continue as a going concern. The Company's ability to
continue as a going concern depends on its ability to improve the
profitability of its existing operation and the possible development of other
business activities. With regard to the development of other business
activities, the Company has taken certain steps toward establishing, through a
subsidiary, a reinsurance business. This subsidiary is seeking seek to
acquire certain types of existing life insurance policies and other long-term
annuity contracts from mainly life insurance companies. Over a period of
time, the Company is hopeful that it will generate profits and positive cash
flow as it services these policies. There can be no assurances that the
Company will succeed in improving the profitability of its existing operation
or establishing a profitable business in the insurance field.
See Note C of Notes to Consolidated Financial Statements for information
regarding the Company's filing of a notice to terminate its pension plan.
See Note I - Subsequent Event regarding the Company and Victoria filing
petitions for reorganization relief under Chapter 11 of the U. S. Bankruptcy
Code.
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UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000 omitted)
-------------------
Dec 31 June 30
1995 1995
ASSETS --------- ---------
Current Assets:
Cash............................................... $1,230 $965
Receivables, net of allowances of $2,863,000 at
December 31, 1995 and $2,481,000 at June 30, 1995. 6,648 7,419
Inventories (Note G)............................... 17,678 16,430
Prepaid expenses and other current assets.......... 2,030 1,113
Net assets of discontinued operations.............. 2 689
--------- ---------
Total Current Assets $27,588 $26,616
Property, Plant and Equipment (Note G).............. $10,250 $12,565
Less accumulated depreciation and amortization..... 7,487 7,924
--------- ---------
$2,763 $4,641
Goodwill............................................ 20,301 20,662
Other Assets and Deferred Charges (Note G).......... 4,566 6,509
--------- ---------
$55,218 $58,428
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Trade payables..................................... $5,155 $6,418
Accrued expenses and sundry liabilities (Note G)... 11,260 12,468
--------- ---------
Total Current Liabilities $16,415 $18,886
Long-Term Debt (Note F)............................. 79,921 81,071
Other Long-Term Liabilities (Note G)................ 5,683 17,881
Minority Interest................................... 1,871 1,624
Stockholders' Equity (Deficit):
Preferred stock, par value $1 per share; 10,000,000
shares authorized; 450,000 shares outstanding..... $450 $450
Common stock, par value $1 per share: 40,000,000
shares authorized; 17,845,000 shares outstanding
(excluding 22,800 shares held in treasury)........ 17,845 17,845
Capital in excess of par value..................... 64,674 64,674
Retained earnings (deficit)........................ (124,054) (136,416)
Unrealized pension liability adjustment............ (3,587) (3,587)
Notes receivable from stock purchase agreement..... (4,000) (4,000)
--------- ---------
Total Stockholders' Equity (Deficit) ($48,672) ($61,034)
--------- ---------
$55,218 $58,428
========= =========
See Notes to Consolidated Financial Statements.
7
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (000 omitted)
-------------------
Six Months Ended
December 31
-------------------
1995 1994
--------- ---------
Cash Flows from Operating Activities:
Net earnings (loss)................................ $12,362 ($18,399)
Adjustments to reconcile net earnings (loss) to net
cash used for operating activities:
Depreciation and amortization.................... 611 806
Minority interest................................ 247 3
Amortization of bond discount.................... 584 505
Gain from reduction of liability for
postretirement benefits other than pensions..... (10,731)
Gain on sale of assets not used in operations.... (5,421)
Accrued loss on sale or shutdown of operations... 9,235
less cash portion of accruals................... (3,204)
Decrease (increase) in assets:
Receivables....................................... 771 3,804
Inventories....................................... (1,248) 2,038
Prepaid expenses and other current items.......... (917) (73)
Other assets...................................... 1,943 113
Increase (decrease) in liabilities:
Trade payables ................................... (1,263) (296)
Accrued expenses and sundry liabilities........... (139) 2,774
Other long-term liabilities....................... (1,694) (404)
--------- ---------
Net Cash Used for Operating Activities ($4,895) ($3,098)
Cash Flows from Investing Activities:
Additions to property, plant and equipment......... ($109) ($242)
Proceeds from sale of assets not used in operations 6,316
Disposition of property, plant and equipment....... 103
Net change in assets of discontinued operations.... 687 1,415
--------- ---------
Net Cash Provided by Investing Activities $6,894 $1,276
Cash Flows from Financing Activities:
Increase (decrease) in long-term debt.............. ($1,734) $3,265
--------- ---------
Net Cash Provided by (used for) Financing Activities ($1,734) $3,265
--------- ---------
Increase in Cash $265 $1,443
Cash at beginning of period......................... 965 662
--------- ---------
Cash at end of period $1,230 $2,105
========= =========
----------
Supplemental disclosures of cash flow information:
Interest paid...................................... $2,057 $5,184
Income taxes paid.................................. 50 50
See Notes to Consolidated Financial Statements.
8
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION AND LIQUIDITY
Basis of Presentation - The accompanying consolidated financial statements
of United Merchants and Manufacturers, Inc. ("UM&M" or the "Company") and
its subsidiaries have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. The results of operations of interim periods are
subject to year-end audit and adjustments and are not necessarily
indicative of the results of operations of the fiscal year. For further
information, refer to the consolidated financial statements and footnotes
included thereto in the Company's Annual Report on Form 10-K for the year
ended June 30, 1995.
Liquidity - During each of the three years ended June 30, 1995, the
Company incurred significant losses from operations and as of December 31,
1995 has a stockholders' equity deficit. As discussed in the Company's
Annual Report on Form 10-K, the Company refinanced its senior debt as of
June 30, 1994 and thereby reduced the total indebtedness of the Company.
While this was a substantial, positive development for the Company, as of
June 30, 1995, the Company's independent auditors' report stated that the
recurring losses from operations, net deficiency in stockholders' equity
and significant debt owed by the Company raise substantial doubt as to the
Company's ability to continue as a going concern. The consolidated
financial statements have been prepared assuming that the Company will
continue as a going concern and do not include any adjustments that might
result from the outcome of this uncertainty. See Note I below regarding
subsequent event.
NOTE B - DISPOSITIONS AND TERMINATIONS OF CERTAIN OPERATIONS
In January 1995, the Company sold its retail outlet store operations for
cash and the assumption by the buyer of certain of the operation's
liabilities. As of December 31, 1994, the Company recognized a loss of
$1.3 million for the sale and the loss from operations from December 31,
1994 to date of sale. The statements of operations and cash flows
presented herein include the results of the retail store operations for
the three and six months ended December 31, 1994. Net sales for the three
and six months ended December 31, 1994 include $4.3 million and $9.8
million, respectively, and operating loss includes $0.9 million and $1.2
million, respectively, from these operations.
Discontinued Operations:
In December 1994, the Company announced that it would close its Buffalo
Mill division, which was its Apparel Textiles segment. At that time, the
Company made a provision for losses of $7.9 million for the closing and
ongoing costs of the division.
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NOTE C - BENEFITS
Notice of Intent to Terminate Pension Plan:
The discussion in the following paragraph relates to the United Merchants
and Manufacturers, Inc. pension plan. The Retirement Savings Plan of
Victoria Creations, Inc., the Company's 79%-owned subsidiary, is not
affected.
The UM&M pension plan covers approximately 8,800 persons, of whom 36 are
current employees. At present, of the 8,800 who have vested benefits in
the plan, 4,500 are receiving pension payments; the others will receive
payments beginning when they become 65 years of age. As set forth in the
Notes to Consolidated Financial Statements in the Company's Annual Report
on Form 10-K for the year ended June 30, 1995, the Company's obligation
for benefits, as projected by actuaries, of $68.8 million exceeded the
assets held in the pension plan trust fund of $ 62.9 million by $5.9
million or 9%. This underfunding was due in large part to the performance
of the investment markets during the calendar year 1994. As a result of
this underfunded position, the Company was scheduled to make minimum
funding payments of approximately $730,000 each quarter to its pension
plan trust fund beginning October 15, 1995. In addition, the Company was
scheduled to make a payment of approximately $2.9 million to its pension
plan trust fund on March 15, 1996. The Company did not make the payments
due October 15, 1995 and January 15, 1996. Effective November 28, 1995,
the Company determined that it could not make the contributions necessary
to fund its pension plan. At that time, the Company filed with the
Pension Benefit Guarantee Corporation ("PBGC") a Distress Termination -
Notice of Intent to Terminate form. The proposed date of the termination
of the Company's pension plan is January 31, 1996. If the application for
a distress termination is accepted by the PBGC, the PBGC will take over
administration of the pension plan, the Company will not make further
contributions to the pension plan and the Company's employees will not
earn additional benefits under the pension plan. The Company believes
that the PBGC will ensure that the employees covered by the pension plan
receive the amounts due to them under the pension plan to the extent that
the payments do not exceed the PBGC maximum guaranteed benefit
(approximately $30,000 a year at age 65).
The Internal Revenue Code provides for a tax of 10 percent on the amount
of the accumulated funding deficiency determined as of the end of the plan
year. If such tax is imposed, and the applicable accumulated funding
deficiency is not paid within the taxable period, the Internal Revenue
Service may impose a tax equal to 100 percent of the funding deficiency.
Postretirement Benefits Other Than Pensions:
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". The statement requires accrual of the cost
of providing postretirement benefits, including medical and life insurance
10
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coverage, during the active service period of the employee rather than the
pay-as-you-go (cash) basis which the company used prior to adoption. The
company elected to immediately recognize the accumulated postretirement
benefit obligation equal to the discounted present value of expected
future benefit payments attributed to employees' service rendered prior to
July 1, 1993. This resulted in a one-time, non-cash charge against
earnings of $15.3 million as of July 1, 1993.
Effective August 31, 1995, the Company discontinued the Company-sponsored
medical plan for its employees, other than those of its 79%-owned
subsidiary, Victoria Creations, Inc., and its retirees. The
discontinuance resulted in a non-cash gain of $10.7 million from the
reduction of a portion of the Company's liability for postretirement
benefits other than pension. The discontinuance will reduce the Company's
ongoing cash expenses by more than $1 million a year.
In a further step to reduce ongoing costs, on February 5, 1996, the
Company notified its employees and retirees that effective February 29,
1996, the Company was discontinuing its group life insurance program which
was predominately paid for by the Company. The discontinuance will result
in a non-cash gain of $4.0 million from the reduction of the balance of
the Company's liability for postretirement benefits other than pension.
NOTE D - INCOME TAXES
The provisions for income taxes for the three and six months ended
December 31, 1995 and 1994 varied from the expected relationship to
earnings (loss) before income taxes since the losses before income taxes
did not result in income tax benefits and the Company had net operating
loss carryforwards to offset the earnings. The amounts shown as
provisions for income taxes are for state and local income taxes.
NOTE E - DIVIDENDS APPLICABLE TO PREFERRED STOCK
The Company has not declared nor paid any cash dividends on its 10%
Cumulative Preferred Stock in order to retain its available cash for use
in its operations. For financial statement purposes, cumulative preferred
dividends are deducted from the results of operations in determining
earnings applicable to common shares whether or not such dividends are
declared or paid.
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NOTE F - LONG-TERM DEBT
Long-term debt consists of the following:
(000 omitted)
------------------
Dec 31 June 30
1995 1995
-------- --------
Secured term loans - see below.................... $ 11,889 $ 12,000
Revolving loans - see below....................... 13,246 15,784
3 1/2% Senior Subordinated Secured Debentures
due 2009 (net of unamortized discount of
$46,395,000 at December 31, 1995 and
$46,908,000 at June 30, 1995).................... 22,747 22,234
5% Subordinated Notes due 2019:
Issued to former senior lender................... 30,000 30,000
Issued in settlement of lawsuit (net of
unamortized discount of $20,876,000 at
December 31, 1995 and $20,947,000 at
June 30, 1995).................................. 1,124 1,053
Other............................................. 915
-------- --------
Total Long-Term Debt $ 79,921 $ 81,071
======== ========
The revolving loans fluctuate based on the Company's cash availability or
requirements. The term loans and revolving loans are secured by
substantially all of the Company's assets.
Effective July 31, 1995, the Company and its 79%-owned subsidiary,
Victoria Creations, Inc. ("Victoria"), each renegotiated its borrowing
arrangements with its current lender. Under the terms of the amended
agreements, the Company's borrowings under the revolving and term loans
with the lender were converted to a term loan. This term loan will be
repayable from collections of certain accounts receivable and sales of
inventory other than those of Victoria and a portion of the proceeds of
sales of the Company's other assets, primarily real property. The term
loan matures July 31, 2000 and bears interest at the rate of 12% a year.
The new arrangements for Victoria consist of a term loan ($4,760,000 at
December 31, 1995) payable $60,000 a month with the balance due June 15,
2000 and a revolving loan, based on Victoria's eligible accounts
receivable and inventories, having a term ending June 15, 1998. The
revolving loan will be renewed automatically for successive one year
periods thereafter unless terminated by either party upon thirty days
notice. These loans bear interest at prime rate plus 3 1/2%, or currently
12% a year.
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NOTE G - SUPPLEMENTAL BALANCE SHEET INFORMATION
Supplemental information regarding certain balance sheet captions is as
follows:
(000 omitted)
------------------
Dec 31 June 30
1995 1995
-------- --------
Inventories:
Raw materials...................................... $ 4,950 $ 5,120
Work in process.................................... 649 484
Finished goods..................................... 12,079 10,826
-------- --------
$ 17,678 $ 16,430
======== ========
Property, plant and equipment:
Land and buildings................................. $ 1,931 $ 3,596
Machinery, equipment and other..................... 8,319 8,969
-------- --------
$ 10,250 $ 12,565
Less accumulated depreciation and amortization...... 7,487 7,924
-------- --------
Net Property, Plant and Equipment $ 2,763 $ 4,641
======== ========
Other assets and deferred charges:
Interest receivable - sale of stock................. $ 1,947 $ 1,873
Assets held for sale................................ 1,653 3,260
Deposits............................................ 283 291
Deferred royalty expenses........................... 272 350
Other............................................... 411 735
-------- --------
$ 4,566 $ 6,509
======== ========
Accrued expenses and sundry liabilities:
Accrued pension liability........................... $ 5,968 $ 5,116
Accrued workers compensation........................ 1,359 1,095
Accrued interest.................................... 1,223 1,210
Accrued compensation expenses....................... 862 1,428
Accrued taxes other than payroll.................... 381 735
Postretirement benefits other than pension.......... 300 1,370
Other............................................... 1,167 1,514
-------- --------
$ 11,260 $ 12,468
======== ========
13
<PAGE>
(000 omitted)
------------------
Dec 31 June 30
1995 1995
-------- --------
Other long-term liabilities:
Postretirement benefits other than pension.......... $ 3,692 $ 13,355
Deferred shutdown costs............................. 1,948 3,732
Other............................................... 43 794
-------- --------
$ 5,683 $ 17,881
======== ========
NOTE H - LEGAL PROCEEDINGS
The Company is a defendant in various lawsuits. It is not expected that
these suits will result in judgements which in the aggregate would have a
material adverse effect on the Company's financial position.
NOTE I - SUBSEQUENT EVENT
Effective February 22, 1996, the Company and its 79%-owned subsidiary,
Victoria Creations, Inc., filed petitions for reorganization relief under
Chapter 11 of the Bankruptcy Code in the United States Court for the
Southern District of New York.
The filing became necessary because the Company's secured lender refused
to extend necessary funding for Victoria's current operations and the
Company guarantees Victoria's debt to the lender. Consequently, the
Company and Victoria are unable to meet their immediate financial
commitments. After a thorough review of all alternatives, the Company was
compelled to take this action to preserve its assets, provide for
continuing operation and protect the interests of its stockholders,
creditors, customers, employees and suppliers.
Subject to bankruptcy court approval of post-petition financing, the
Company and Victoria plan to continue to operate their businesses as
debtors-in-possession while the reorganization is pending. If
post-petition financing is not ordered by the court, it is likely that the
Company will be liquidated.
14
<PAGE>
UNITED MERCHANTS AND MANUFACTURERS, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Changes in Securities
Information required under this item is contained in Part I,
Note F of Notes to Consolidated Financial Statements, which is
incorporated herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(A) Reports on Form 8-K during quarter - None
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED MERCHANTS AND MANUFACTURERS, INC.
(Registrant)
Date: February 23, 1996 By /s/ Norman R. Forson
Norman R. Forson
Senior Vice President and
Corporate Comptroller
15
<PAGE>
UNITED MERCHANTS AND MANUFACTURERS, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBIT
The following exhibit is being filed herewith:
Exhibit No.
(27) Financial Data Schedule as of and for the quarter ended December
31, 1995 is filed herewith as Exhibit EX-1.
E-1
<PAGE>
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<NAME> UNITED MERCHANTS AND MANUFACTURERS, INC.
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<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 1230
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<ALLOWANCES> 2863
<INVENTORY> 17678
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<PP&E> 10250
<DEPRECIATION> 7487
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<BONDS> 79921
<COMMON> 17845
0
450
<OTHER-SE> (66967)
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